Which of the Following Adjustments Would Require Decreasing the Liabilities

question 81

Multiple Choice

Which of the following adjustments would require decreasing the liabilities reported on the statement of financial position?

• A) A company uses $400 worth of supplies during the year.
• B) A company records $400 worth of depreciation on equipment.
• C) A company has earned $400 of revenue collected at the beginning of the year.
• D) A company records $400 of wages earned by employees that will be paid next year.

---

Definitions:

Creditor

An individual or institution to whom money is owed by the debtor or the borrower.

Cash Investment

Cash investment refers to funds invested into a business or market with the expectation of generating a financial return.

Accounting Equation

Represents the fundamental relationship in accounting: Assets = Liabilities + Equity, ensuring a balance in a company's financial statements.

Owner's Equity

The residual interest in the assets of the entity after subtracting liabilities, essentially representing the owner's claim against the company's assets.